Five Reasons to Get Your Business Ready to Sell Now
Jeff Storch | 04.26.21
The old proverb is that the best time to plant a tree was 20 years ago and the second best is now. The same might be said for getting your business ready to sell. There may be even more reasons to do so in today’s environment. Following are five reasons owners may wish to consider selling now.
- Prepare for the unexpected. Even if you have no intent on selling anytime soon, unexpected events happen, such as death or disability of you or a close family member. If your circumstances suddenly changed and you needed to exit the business, you would be better off having prepared your business for sale ahead of time.
- Improve current operations and profitability. In preparing your business for sale, it is common to evaluate, update, and document procedures, employee job descriptions, customer contracts and concentration, supplier relations and risk, etc. Not only are doing those things beneficial for improving how the business looks for a sale, but they also can help improve operations of everyday business, increasing your bottom line.
- Higher selling prices. Perhaps unexpectedly, selling prices have actually increased for some businesses that were able to continue to operate successfully during the pandemic. There are fewer good businesses on the market and so buyers are willing to pay a premium for them. How long this will last is not known. A change in the economy or other disruptive event could change it from a seller’s market to a buyer’s market with little warning.
- Take advantage of opportunity. Because there is a dearth of sellers, there are buyers making unsolicited offers. If you have already done your homework and gotten your business prepared to sell even though you haven’t actually marketed it, you will be more prepared if you get an unsolicited offer. This can both increase your sales price and shorten the time and cost involved in the sales process.
- Act before tax increases. President Biden’s proposed tax plan would increase the capital gains tax rate. While it is possible that such a tax rate could be imposed retroactively, it is hoped that any rate change will be done prospectively to give people a chance to plan. Therefore, many commentators believe it is possible, if not likely, that capital gains tax rates will go up in 2022, meaning 2021 would be the last year to sell under the current lower rates.
As explained above, today is always a good time to start planning on selling your business. However, if you are contemplating selling before 2022 to take advantage of current tax rates, it is even more important that you act soon. If there is a rush of sellers coming to market before year end, it may take longer to complete the sale because the various professionals involved (lenders, investment bankers, brokers, real estate title companies, accountants, attorneys, etc.) may have many other sellers to work with. Therefore, the sooner you plant the seeds of sale, the more prepared you will be.
If you are interested in learning more about readying your business for sale, please contact the author or any of Boardman Clark’s mergers and acquisitions attorneys.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.